May 17 (Bloomberg) -- TransForce Inc., whose stock is the
top performer among Canadian industrial companies this year, is
looking to the U.S. for the next round of revenue gains.

Chief Executive Officer Alain Bedard expects the provider
of courier, oil-rig-hauling and waste-management services to
resume acquisitions next year after about C$370 million ($365
million) in 2011 deals helped boost sales to C$2.7 billion. Now,
his goal is to almost double revenue by 2017.

“If we want to be at C$5 billion, it’s going to have to be
south of the border,” Bedard said in a telephone interview.
“For sure over the next few years our growth will be mostly in
the U.S.”

Acquisitions are part of Bedard’s push to remake Canada’s
largest trucker into a continent-wide company selling transport,
logistics and energy services. Montreal-based TransForce is
North America’s biggest mover of oil- and gas-drilling rigs, a
business with C$321 million in 2011 sales that counts Royal
Dutch Shell Plc and Exxon Mobil Corp. among its clients.

“Rig hauling, fluid hauling, same-day courier are nice
niches that can allow them to grow in the U.S.,” said Walter
Spracklin, an RBC Capital Markets analyst in Toronto. “These
are niche sectors that are not in the ultra-competitive U.S.
truckload business. It’s an appropriate strategy.”

TransForce’s 36 percent gain this year before today led the
18-company Standard & Poor’s/TSX Industrials Index, which was up
1 percent. TransForce fell 1.5 percent to C$17.33 at 12:39 p.m.
in Toronto, giving it a market value of C$1.66 billion.

‘Early Stages’

“The share price has done very well but there’s still lots
of room to grow because Mr. Bedard has made some acquisitions
that are at the early stages of profitability,” said Spracklin,
who made the stock a top pick in January, up from a previous
rating of outperform. “It will be a multiple-year turnaround.”

The 2011 purchases included Dallas-based package and
courier company Dynamex Inc. and I.E. Miller Services Inc.,
which helps relocate oil rigs in five U.S. states. In April,
TransForce agreed to pay about C$10 million for oil-field
services assets of Peak USA Energy Services, a unit of Nabors
Industries Ltd.

By value, last year’s purchases represented the bulk of
C$629 million of acquisitions made since 1999, according to data
compiled by Bloomberg. Of that total, C$334 million in
transactions involved U.S. companies, the data show.

Segment Breakdown

Package and courier operations are TransForce’s largest
unit, at 35 percent of 2011 revenue. Specialized services such
as rig moving and waste management made up 24 percent, compared
with 23 percent for so-called truckload freight and 18 percent
for the less-than-truckload unit. Less-than-truckload carriers
haul goods from more than one customer in each trailer.

TransForce “has positioned itself well to capture future
growth opportunities in the energy services and package and
courier markets in North America,” Damir Gunja, a TD Securities
analyst in Toronto, told clients in an April 27 note.

First-quarter net income more than doubled to C$30.2
million as sales jumped 40 percent to C$788.2 million,
TransForce said April 26. It also announced a 13 percent
dividend increase, to 13 Canadian cents a share from 11.5 cents.

U.S. revenue now makes up 36 percent of sales, and Bedard
said he expects the proportion to climb in the next five years.

Canada’s dollar, which has gained more than 50 percent
against its U.S. counterpart in the past 10 years, isn’t the
only lure for TransForce to buy assets in the U.S. Cheaper debt
and the attraction of a larger market also matter, Bedard said.

‘Day and Night’

“The potential for growth in our package and courier
business is day and night what it is in Canada,” he said. “In
Canada we are a huge player whereas in the U.S., we are a small
player.”

Dynamex, which had $406 million in revenue in its 2010
fiscal year, gives TransForce a foothold in same-day U.S.
courier deliveries. That’s an industry whose annual sales may be
as much as C$9 billion, estimates Kevin Chiang, a CIBC World
Markets analyst in Toronto.

Turan Quettawala, a Scotia Capital Inc. analyst in Toronto,
told clients last month that TransForce may be too dependent on
gobbling up companies.

Too Many Deals?

“Organic growth remains weak in most of TransForce’s
segments,” Quettawala wrote in an April 30 note. Growth “will
likely depend on energy services, ongoing restructuring, which
is baked into forecasts, and acquisitions, for which there is
little room on the balance sheet.”

He rates the shares as sector perform, making him the only
one of 10 analysts without a buy recommendation, according to
data compiled by Bloomberg. TD Securities’ Gunja has an action
buy list rating on the stock.

Bedard is planning cost-saving steps such as shutting about
50 terminals in the package and trucking units within three
years, and putting the Canadian package and courier units on one
software system. Earnings before taxes, depreciation and
amortization may reach as much as C$400 million in 2012, up from
C$312 million last year, he said.

Part of the increased profit will help cut debt, Bedard
said. TransForce had C$881 million of loans and borrowings as of
March 31, up from C$847 million three months earlier.

“If you buy TransForce you are going to have to live with
a company that has debt, that is able to manage and reimburse
it, and that does not dilute existing shareholders by issuing
stupid equity just not to have debt,” Bedard said.

One possible asset sale is the truckload unit, which
according to RBC’s Spracklin is “on the block.” He estimated a
transaction might fetch as much as C$440 million.

Bedard wouldn’t comment on the likelihood of a sale, other
than saying the business is “non-core to a certain degree.”

“For me right now it’s a keeper, but it’s a not a
grower,” Bedard said. “This is why we will grow through
acquisitions more on the parcel side in the U.S. and we will
grow more on the energy side.”